UPDATED: EU-U.S. trade war talk threatens bourbon sales

Courtesy of Brown-Forman

Talk of a trade war between the U.S. and Europe is causing some headaches for bourbon distillers, with industry organizations warning of harm to consumers and producers and expressing concerns Friday to legislative leaders including Senate Majority Leader Mitch McConnell.

As leaders of the 20 most powerful nations are meeting in Hamburg, Germany, trade tensions between U.S. President Donald Trump and the European Union are escalating, according to The Financial Times, with bourbon being one of the products that may be caught in the trade war crossfire.

Trump has threatened limiting steel imports, and Europeans plan to retaliate by targeting politically sensitive goods, including bourbon (from McConnell’s home state) and orange juice (produced heavily in the key swing state Florida.)

Jean-Claude Juncker

European Commission President Jean-Claude Juncker said Friday that the mood “is increasingly combative,” the FT reported.

Bourbon is an $8.5 billion industry in the state and supports 17,500 jobs with annual wages of $800 million, according to the Kentucky Distillers’ Association. The industry filled a record of nearly 1.9 million barrels of bourbon last year.

Total U.S. spirits exports to the EU last year reached $654 million, of which bourbon accounted for about 20 percent, according to the Distilled Spirits Council of the United States (DISCUS).

Louisville-based distiller Brown-Forman, for example, generates about a quarter of its sales in Europe, including 7 percent in the United Kingdom and 4 percent each in Germany and France. The distiller told Insider Friday that it had no comment at this time.

DISCUS, based in Washington, D.C., warned Friday that “retaliatory tariffs on U.S. spirits exports to the EU will harm consumers, producers and the U.S. and EU spirits sectors.”

“U.S. and EU spirits exporters have enjoyed duty-free access to each other’s markets for more than two decades, which has greatly benefitted both spirits producers and consumers and resulted in increased exports, jobs and consumer choice,” the council said.

“Members of the Distilled Spirits Council have made considerable investments in both the U.S. and the EU to create complementary product portfolios comprised of both domestic and imported brands,” DISCUS said. “U.S. whiskeys are an important component of these investment strategies and brand portfolios.”

Eric Gregory, president of the Kentucky Distillers’ Association, told Insider that much of the recent growth of bourbon sales had occurred outside America’s borders.

The association has worked hard to allow Kentucky’s distillers to compete internationally on a level playing field, he said. For example, the association helped eliminate taxes on bourbon that favored Scotch whisky.

Gregory says the association is still exploring the potential impact of the European considerations, but he worries about its impact on the “golden age” of bourbon.

He said the organization on Friday reached out to legislative leaders, including McConnell, to express its concerns.

McConnell’s office told Insider via email Friday that the senator “is a staunch supporter of free and fair trade and ensuring that Kentucky exports, including bourbon, are able to compete internationally on a level playing field. He will continue to engage with the administration to help ensure Kentucky exports are not placed at a disadvantage.”

UPDATE: This story was updated with comments from DISCUS and Sen. McConnell’s office.